KVP, PPF or NSC: Which is best?
The Govt has re-introduced the Kisan Vikas Patra with the
announcement for the same being made in the Budget 2014 which was presented by
Arun Jaitley. The Govt had earlier discontinued the Kisan Vikas Patra in 2011
but these have now been reintroduced as discontinuation of the same was harming
the savings mobilization of small investors.
Apart from the Kisan Vikas Patra, there are various other
fixed income earning instruments as well which can also be purchased from the
Post Office and the most popular of these instruments are Investments in PPF
Account and Investments in the National Savings Certificate (NSC). Sometimes, a
conservative investor needs to select one of these. So there is a question of
which is best KVP, PPF or NSC
These instruments are fixed income earning instruments and
can be purchased from the Post Office, Here is a comparative analysis of KVP,
PPF and NSC.
80 C Benefits
The Investment made in PPF Account and National Savings
Certificate is allowed as a deduction under Section 80C. However, the maximum
deduction allowed under Section 80C is limited to Rs. 1,50,000 (FY 2014-15)
However, the investment made in the Kisan Vikas Patra is not
allowed as a deduction under Section 80C.
Interest Rate
The Interest Rate on KVP is the lowest i.e. 8.4% whereas the
Interest Rate on PPF and NSC is in the range of 8.5 to 9%.
The Interest Rate on PPF Account is announced by the Govt
every year and keeps on changing every year whereas the Interest Rate on the
NSC depends on the maturity period of the instrument. Although the interest
rate on PPF & NSC depends on various factors – it varies in the range of
8.5% to 9%.
Tax on Interest earned
The Interest earned on PPF Account is Tax free and fully
exempted from the levy of income tax.
* Interest earned on the National Savings Certificate is
reinvested in the National Savings Certificate and therefore can be claimed as
a deduction under Section 80C as the amount has been reinvested. Therefore, the
interest on this income also becomes tax free.
The interest earned on the KVP is not tax free and tax would
be payable on the interest earned on the KVP as per Income Tax Slab Rates.
Maximum Investment Allowed
The Maximum Investment allowed in PPF Account is Rs.
1,50,000 p.a. (w.e.f. 2014 onwards).
However, there is no maximum limit on the
Investment allowed in the National Savings Certificate and the Kisan Vikas
Patra.
Minimum Amount to be invested
The minimum amount to be invested in the all the three
instruments i.e. KVP, PPF & NSC is Rs. 100.
However, Rs. 500 is the minimum amount to be invested in PPF
Account every year.
However, there are no such criteria in KVP and NSC and no
minimum amount is required to be deposited in KVP and NSC every year.
Place of Purchase/ Investment
KVP and NSC can only be purchased from Post Office and not
from any other place.
However, PPF Account can now be opened in both Post
Offices as well as with certain specified Banks.
Maturity period
The maturity period of the PPF Account is 15 years whereas
the maturity period of KVP is 8 years and 7 months.
The maturity period of the National Savings Certificate is 5
years and 10 years depending on type of certificate in which the investment has
been made.
Premature Withdrawals
The amount in the PPF Account can be withdrawn anytime after
5 years at the discretion of the investor. However, only 50% of the amount in
the PPF Account can be prematurely withdrawn.
Premature withdrawal from KVP and NSC is allowed only under
the following circumstances:-
- On the death of the holder or the Holders in case of Joint Holders
- On forfeiture by a pledgee being a Gazetted Govt Officer
- When ordered by Court of Law
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